Payroll is the system used to calculate employee paychecks and although companies can handle payroll in a variety of ways, each system requires inputting certain employee information.
Whether a company uses an in-house computerized payroll system or outsources to a service, each system requires basic information about their employees, including names, bank information, and insurance details. To calculate how much an hourly employee should be paid, the person in charge of bookkeeping will need access to each employee’s time card, which will have a record of the number of hours worked each week. The payor will then need to input specific information, including:
Each employee’s code, which is used to look up other details about the employee, including his or her bank account information;
The number of hours that each employee worked; and
The rate of pay.
To determine the payment amount, the number of hours worked is multiplied by the rate of pay. If the time card shows that an employee worked overtime, then the payor will need to do an overtime calculation by taking the number of overtime hours and multiplying the total by the rate of pay multiplied by 1.5.
Salaried employees are usually paid a fixed wage and do not often qualify for overtime. To calculate a salaried worker’s paycheck, the bookkeeper will need to divide the person’s predetermined annual salary by the number of pay periods. This means that if an employee is paid semimonthly, his or her salary would be multiplied by 24.
Deductions must then be subtracted from these totals. This will include federal income tax, Social security tax, and any applicable payroll taxes. This calculation can be done manually or by using payroll software. Additional deductions may include medical and dental insurance as well as pension payments or retirement benefits.
Calculating paychecks can quickly become overwhelming, even for small businesses with only a few employees. Retaining the services of an experienced financial management team can make all the difference in a company’s ability to stay on top of payments and make appropriate deductions. If you have questions about your payroll system, please make an appointment with a member of the CORE financial services team by calling 918-209-3441 to speak with our Tulsa office, 405-288-1207 to reach a member in our Oklahoma City office, or 580-353-2376 to speak with our Lawton office.